Actions include removing pension portability freeze and phasing out special capital treatment of payment deferrals
OTTAWA, ON, Aug. 31, 2020 /CNW/ - Today the Office of the Superintendent of Financial Institutions (OSFI) announced that it is lifting the temporary freeze on portability transfers for private pension plans. As well, OSFI is gradually phasing out the special capital treatment of loan and insurance premium payment deferrals that was provided to banks and insurers at the start of the global pandemic.
In March, when market volatility was high, OSFI recognized the potential negative impact that these conditions could have had on pension plan solvency levels and responded by freezing portability transfers and annuity purchases from defined benefit pension plans. Now that markets have steadied and the overall solvency of pension plans is sufficiently stable, OSFI is removing these restrictions. Additional conditions and safeguards have been put in place to protect the rights and interests of pension plan members and beneficiaries.
OSFI's decision to discontinue the special regulatory capital treatment of deferrals, which permit loan and insurance premium payment deferrals to be treated as performing, reflects the temporary nature of these measures and will ensure that reporting requirements remain accurate in reflecting credit risk. The gradual phase out of this special capital treatment supports the ongoing stability of Canada's financial system by ensuring a smooth transition back to pre-existing requirements. Institutions will continue to have the flexibility to address clients' needs on a case-by-case basis using the support measures they have in place for borrowers.
OSFI responded quickly to the economic uncertainty in the spring by announcing a series of measures to support the Canadian financial system and protect pension plan members. Additionally over the course of the past five months, institutions and private pension plans have demonstrated their resilience and continue to adapt their risk management tools, operations, and processes to the current environment. As a result, OSFI has begun the careful transition back to its standard regulatory and supervisory position.
As the economy stabilizes, risks remain in the financial sector. OSFI will closely monitor conditions and remains ready to take any further required action. OSFI's regulatory or supervisory adjustments will continue to be credible, consistent, necessary and fit-for-purpose in the Canadian context.
"The changes announced today result from our ongoing effort to ensure that our regulatory measures continue to be appropriate for this unprecedented situation while remaining risk-focused and forward-looking."
— Jeremy Rudin, Superintendent
Key measures announced for private pension plans include:
- Lifting the temporary freeze on portability transfers and annuity purchases and providing clear conditions on how to protect the benefits of plan members and beneficiaries.
Key measures announced for banks include:
- Loans granted payment deferrals before August 31 are still eligible for the current six month special capital treatment.
- Loans granted payment deferrals after August 30 and on or before September 30 will be eligible for the special capital treatment outlined in March for up to three months.
- Loans granted payment deferrals after September 30 will not be eligible for the special capital treatment.
Key measures announced for insurers include:
- Loan and premium payment deferrals granted before August 31 are still eligible for the current six months special capital treatment.
- Loan and premium payment deferrals granted after August 30 and on or before September 30 will be eligible for the special capital treatment outlined in OSFI's March and April communications for up to three months.
- Loan and premium payment deferrals granted after September 30 will not be eligible for the special capital treatment.
For more detail please see the letter issued to Federally Regulated Life and Property & Casualty Insurers. We have also updated our FAQs to provide further clarity.
The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.
OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their requirements.
SOURCE Office of the Superintendent of Financial Institutions
For further information: Media Contact: OSFI - Public Affairs, [email protected], 343-550-9373